edit: as of 12pm CNX is down close to 30%…not good.
State lets off steam in coal gasification plans
Lenore Taylor, national correspondent | August 07, 2008
THE Queensland Government appears to be putting the brakes on its emerging coal gasification industry as it considers environmental concerns and whether the industry can co-exist with plans for a $20 billion LNG export industry.
Queensland’s coal fields have attracted an investment bonanza in recent years as companies including Santos and Queensland Gas Company plan to use coal seam methane to develop a massive new LNG export industry, and other firms such as Linc Energy continue long-standing efforts to commercialise the entirely different coal gasification technology, which burns coal deep underground to extract a gas that can be liquefied into diesel and aviation fuel.
Federal Resources Minister Martin Ferguson has hailed both CSM and coal gasification as crucial to Australia’s future energy security.
But the Queensland Government has realised that in several cases it has issued rights over the same tenements to companies pursuing each of the technologies — even though most say they are incompatible because the coal gasification process burns the methane that the CSM producers are seeking to extract. And the Government now believes that in the long run the market will support the full-scale development of only one of the technologies, with cost and greenhouse emission levels from the production process the deciding factors.
“I expect both will develop until the market works out which one is most cost effective, but at the end of the day only one of these technologies will emerge as the winner on cost and greenhouse grounds,” Queensland Climate Change Minister Andrew McNamara told The Australian.
In the meantime, as it seeks to sort out the problem of overlapping coal gasification licences issued under the Minerals Resources Act and CSM licences issued under the Petroleum and Natural Gas Act, the Queensland Department of Mines has sought advice from the Queensland Conservation Council and has heard deep concerns about the environmental impact of the coal gasification process, including its carbon emissions and claims that it could contaminate ground water.
The QCC told The Australian that it considered coal gasification a “more environmentally questionable resource” than CSM and had recommended to the Government that no UCG project should receive approval to commercialise in Queensland.
A spokeswoman for Queensland Mines and Energy Minister Geoff Wilson said the Government “has no intention of granting production tenures for underground coal gasification for at least three years”.
“Underground coal gasification is a new technology, untried in Australian conditions, and it poses some potential problems, especially with groundwater systems,” she said.
“We will only do what is best for Queensland. In this case, we don’t believe it’s in the best interests of Queensland to grant production tenures for technology that is untried.”
And Mr McNamara said his department had asked Linc Energy — the most advanced of the coal gasification companies — to perform new demonstration trials so that the Environmental Protection Agency could monitor emissions and groundwater quality. “Linc has been asked to do another more rigorous trial of its technology; it is critical we make sure we don’t contaminate our groundwater,” he said.
Linc CEO Peter Bond, whose company has a market capitalisation of $1.45 billion and has seen its share price rise from just 20c to $3.50 over the past two years, rejects the notion that his technology is incompatible with CSM performing stringent environmental assessments entirely of its own volition.
“All we are looking for is a fair go. These technologies can work side by side and that would surely be what was best for the state … it’s just that Queensland Gas appears to want the Government to give it all the ground for itself,” Mr Bond said.
“As for the environmental assessments, we haven’t been asked to do anything; we’re setting our own standards at the highest possible levels because we have to be seen to be the best.”
The Queensland situation is being monitored with concern by the peak national body for the oil and gas exploration sector, the Australian Petroleum Production & Exploration Association.
APPEA chief executive Belinda Robinson said: “These technologies are fundamentally incompatible activities. These are issues that need to be urgently resolved.
“We will work with the Queensland Government to do that,” Ms Robinson said.
The Queensland Government is also monitoring the impact of the CSM producers on groundwater, particularly proposals to reuse the water in agriculture.
Linc says its proposed underground production processes create only about 8 per cent more carbon dioxide than the process to create regular diesel, but that its fuel is much cleaner.
In a speech to a coal-to-liquids (CTL) and gas-to-liquids conference in Brisbane in February, Mr Ferguson said he regarded the technologies as “the key” to Australia’s future energy security.
“CTL will soon be real right here in Queensland at Chinchilla. Linc Energy is about to open a pilot plant that will produce 5 barrels a day of ultra-clean diesel using gas feed from its underground coal gasification project,” Mr Ferguson said.
“This is a very exciting development at the cutting edge of energy science and technology, and I wish the company every success in scaling up to commercial volumes.”
Mr Ferguson’s department is developing an “action agenda” for the emerging industry. But conservationists argue that the Government should not support any technology that makes the climate change problem worse.
“It beggars belief that in the face of climate change and the urgent need to reduce emissions, anyone could seriously promote liquefying coal to make a fuel that will damage the atmosphere more than conventional fuels, even if only 8 per cent more,” Greens senator Christine Milne has said.
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